Google Seeking To Normalize Tax Relations With Europe, Settle Claims

Company one of several US firms being pressured by Europe to pay more taxes.

Many governments in Europe don’t believe that US companies such as Google, Amazon, Facebook, Starbucks and Apple are paying their fair share of taxes. For example, Apple may face remedial tax liability in Europe of $8 billion, according to a Bloomberg report.

Google is reportedly now negotiating with European governments to settle myriad tax disputes and to “normalize” its tax relationship with The Continent. According to the Wall Street Journal (WSJ), Google is now in active talks with France and other government ministries about what they claim are unpaid or underpaid taxes. Alphabet Inc. executive chairman Eric Schmidt has reportedly been meeting with European officials in Davos, Switzerland this week.

France’s economic minister was quoted in the WSJ article saying there’s “a positive dynamic” in the company’s discussions with Europe. Google, Apple and Facebook all located their European headquarters in Ireland, while Amazon is in Luxembourg. Ireland offers lower corporate tax rates than almost all other countries in Western Europe (12.5 percent, in most cases; 6.25 percent in the case of R & D).

Most other countries in Western Europe have corporate tax rates above 20 or 25 percent. France taxes corporate profits at levels above 30 percent. European governments have accused Apple, Google and others of tax avoidance through arcane legal and accounting practices.

European governments have been trying to find ways to gain more tax revenue from US firms and to prevent the manipulation of revenue accounting and “diversion” of profits to lower tax jurisdictions.

Under pressure last May, Amazon changed its accounting practices. Instead of recording all European revenue in Luxembourg, the company said it would report revenue in individual countries, creating more tax exposure for the company and revenues for local governments.

About The Author

Greg Sterling is a Contributing Editor at Search Engine Land. He writes a personal blog, Screenwerk, about connecting the dots between digital media and real-world consumer behavior. He is also VP of Strategy and Insights for the Local Search Association. Follow him on Twitter or find him at Google+.